Apple Says It Will Fight Greenlight’s Bid to Block Vote

David Einhorn, president and co-founder of Greenlight Capital Inc. Einhorn has accused Apple of having a “mentality of depression” with respect to its cash pile. Photographer: Scott Eells/Bloomberg

Feb. 14 (Bloomberg) -- Apple Inc. said it will fight
Greenlight Capital Inc.’s bid to bar it from adopting a measure
that would restrict its ability to issue preferred stock.

The maker of iPhones and MacBooks filed a response
yesterday in U.S. District Court in New York to Greenlight’s
request to block a shareholder vote on the matter. The hedge
fund sued Apple Feb. 7 seeking an injunction.

“The proposed injunction would harm the public interest”
and should be denied, Apple said in the filing. The measure
“gives common shareholders greater power -- the right to
approve issuance of preferred shares,” Apple said.

Greenlight founder David Einhorn has said Apple should
issue high-yielding preferred stock to provide more value to
shareholders from a $137 billion stockpile of cash. The measure
up for vote would eliminate “Apple’s power to issue preferred
stock,” according to Greenlight’s complaint.

The battle with Einhorn is the latest episode in a long-running effort by some Apple shareholders to get the iPad maker
to give more of its cash back to investors in the form of a
dividend or buyback. Einhorn has accused Apple of having a
“mentality of depression” with respect to its cash.

At a Feb. 12 investor conference in San Francisco, Apple
CEO Tim Cook called Greenlight’s suit a “silly sideshow” and a
“distraction.” He said the company is considering giving more
money back to shareholders.

‘Unbundling’ Rules

The hedge fund claims that Cupertino, California-based
Apple unfairly grouped the preferred-share measure with other
matters to be voted on at a meeting Feb. 27, violating the U.S.
Securities and Exchange Commission’s “unbundling” rules.
U.S. District Judge Richard Sullivan in Manhattan set a hearing
for Feb. 19 to consider Greenlight’s request to block the vote.

Apple said in its filing that it’s not violating SEC rules
and that the measure only eliminates so-called blank check
preferred-stock provisions. Without such provisions, preferred
shares could still be offered as long as investors approve,
according to Apple.

“Apple’s proposal only formalizes Apple’s stated
commitment to seek shareholder approval if it wants to issue
preferred shares,” the company said in the filing. Greenlight
“will suffer no injury, much less irreparable injury, absent
the preliminary injunction,” Apple said.

Stanford Law School Professor Joseph Grundfest said in a
phone interview yesterday that he expects Einhorn will be “a
loser in this litigation.”

Apple ‘Correct’

“Apple is correct as a matter of law and as a matter of
policy,” said Grundfest, a senior faculty member at the Arthur
& Toni Rembe Rock Center for Corporate Governance. “If he’s
looking to generate a great deal of publicity, this complaint
has been a huge success.”

In yesterday’s filing, Apple gave details of conversations
between Cook, Chief Financial Officer Peter Oppenheimer and
Einhorn about the possibility of issuing preferred stock.

In a conversation this month, Einhorn told the Apple
executives that a shareholder vote could pose a “roadblock that
was not needed” to issuing preferred stock and that he wanted
to “take the risk away,” according to the filing.

“We told Mr. Einhorn that Apple was considering his
proposal, but that the board would not issue his proposed
perpetual preferred shares without shareholder approval,”
Oppenheimer said in a declaration filed with court.

Greenlight, which said it holds 1.3 million shares of
Apple, said in an e-mailed statement in response to Cook’s Feb.
12 comments that “if Apple thinks the lawsuit is a waste of
resources, it could simply end the matter by complying with
existing law and filing a new proxy that unbundles the proposed
changes to the charter so that shareholders can express their
views on each matter separately.”

The case is Greenlight Capital LP v. Apple Inc., 13-cv-900,
U.S. District Court, Southern District of New York (Manhattan).